Turnover: Liquidity or Uncertainty?

Management Science, 2014, v. 60 (10), pp. 2478–2495

47 Pages Posted: 15 Jan 2009 Last revised: 28 Nov 2015

See all articles by Alexander Barinov

Alexander Barinov

University of California Riverside

Date Written: October 17, 2014

Abstract

I show that turnover is unrelated to several alternative measures of liquidity and liquidity risk and that liquidity risk factors cannot explain why higher turnover predicts lower future returns. I find that the aggregate volatility risk factor explains why higher turnover predicts lower future returns. I also find that the negative relation between turnover and future returns is stronger for firms with high market-to-book or bad credit rating and these regularities are also explained by the aggregate volatility risk factor.

Keywords: liquidity, idiosyncratic volatility, uncertainty, turnover, aggregate volatility risk, real options

JEL Classification: G12, G13, G32, E44

Suggested Citation

Barinov, Alexander, Turnover: Liquidity or Uncertainty? (October 17, 2014). Management Science, 2014, v. 60 (10), pp. 2478–2495, Available at SSRN: https://ssrn.com/abstract=1327297 or http://dx.doi.org/10.2139/ssrn.1327297

Alexander Barinov (Contact Author)

University of California Riverside ( email )

900 University Ave.
Anderson Hall
Riverside, CA 92521
United States
585-698-7726 (Phone)

HOME PAGE: http://faculty.ucr.edu/~abarinov/

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